The total number of millionaires in the Bay State is going up and up.
A new report shows that the count of millionaires and ultra-wealthy individuals in Massachusetts jumped in recent years after the millionaire’s tax went into effect.
The number of ultra-wealthy individuals, those with at least $50 million in total wealth, grew 35% from 2022 to last year — from 1,954 people to 2,642 people.
These 2,642 ultra-wealthy individuals are among the taxpayers most impacted by the 4% percent tax on the portion of a taxpayers’ annual income above $1 million, according to the report by the Institute for Policy Studies and State Revenue Alliance.
Advocates for the higher income tax say this report shows that multi-millionaires are not leaving the state.
“This is not a surprise,” lead report author Omar Ocampo, researcher at the Institute for Policy Studies, said in a statement. “Research has demonstrated that million-dollar earners and high net worth individuals tend to exhibit lower rates of migration compared to the general public. Their family, business and social network deeply root them to amenity rich locales where they enjoy a high quality of life.
“A modest increase on their incomes does not compel the overwhelming majority of millionaires to flee to other states,” Ocampo added. “In fact, the number of individuals in Massachusetts with a net worth of a million dollars or more has expanded and their wealth has seen tremendous growth since 2022.”
The report found that the number of millionaires by net worth in Massachusetts rose by almost 39% from 2022 to last year — from 441,610 people to 612,109 people.
Because the income surtax only applies to taxpayers with an annual income above $1 million, only a small percentage of those millionaires will pay the higher income tax, the report states. The number of Massachusetts taxpayers with annual income above $1 million was about 27,000 people in 2022, the last year when IRS data is available.
The new tax generated $2.46 billion in its first year, and the state has approved funding for transportation and public education.
“It has been two years into the experiment of progressive taxation in Massachusetts and the evidence is clear: the surtax has succeeded in raising revenue and exceeded all expectations,” Ocampo said. “The state now has more resources at their disposal to help fund essential programs that expand economic opportunity for all.”
This report found similar growth in the number of wealthy individuals in Washington state after the passage of a 7% tax on capital gains above $250,000.
The Massachusetts Fiscal Alliance campaigned against the millionaire’s tax, and the group has been highlighting its negative effects — saying the income surtax amendment makes it tough for local businesses to recruit top tier talent.
“There is absolutely zero debate that the income surtax is having a negative impact on the state economy, and competitiveness,” said Paul Diego Craney, executive director for the Massachusetts Fiscal Alliance.
“Countless studies and data points have proven this,” he added. “Additionally, other states with low or no income taxes are seizing on Massachusetts’ over tax impulses. You cannot be in denial of the tax’s very damaging impact any longer.”